Doc. 10458

22 February 2005

Europe’s growing energy vulnerability

Report

Committee on Economic Affairs and Development

Rapporteur: Mr Radu-Mircea Berceanu, Romania, Socialist Group

Summary

Most European countries experience growing energy consumption and increasing dependence on imported fossil fuels. This is a source of concern because of rising global competition over primary energy resources, driven by economic development and population growth, as well as by Europe’s ambitious environmental commitments under the Kyoto Protocol. Moreover, the recent surge in the price of oil (and, as a result, also of gas and coal) and geopolitical uncertainties as regards the continuity of sufficient oil supplies add to Europe’s energy vulnerability.

The report points to the economic and political implications of such growing dependence, especially over the longer term when global reserves of fossil fuels will diminish dramatically. It calls for a reinvigorated public debate to facilitate informed political choices – starting with the European Union and its internal energy market – as regards priority areas of action in support of research, resource development, strategic reserves, investment in power generation, network infrastructure and regulation at pan-European level. At the same time, it suggests that individual countries should be free to choose their own mix of energy resources as these reflect the national situation while aiming to reduce reliance on any one type of energy or a single supplier.

Given the limited indigenous energy resources in most European countries, Europe has a vital interest in intensifying the energy dialogue with its closest partners in order to minimise the physical, economic and political risks posed to the security of energy supplies for both importing and exporting countries. It should also seek to stabilise energy demand through improvements in energy end-use efficiency and greater incentives for energy savings in sectors such as transport, power and construction. Finally, the report asks the member states of the Council of Europe to shape coherent policies for developing alternatives sources of energy, without neglecting any of the traditional ones.

I.       Draft resolution

1.       Most European countries experience growing energy consumption and increasing dependence on the importation of fossil fuels. The Parliamentary Assembly views this with concern, especially against the background of rising global competition over primary energy resources driven by economic development and population growth, as well as by Europe’s ambitious, and welcome, environmental commitments under the Kyoto Protocol. Moreover, the recent surge in the price of oil (and, as a result, also of those for gas and coal) and geopolitical uncertainties as regards the continuity of sufficient oil supplies add to Europe’s energy vulnerability.

2.       Fossil fuels – especially oil, natural gas and coal – are the dominant sources of Europe’s energy consumption and their use will continue to grow in the coming decades unless policy measures are taken to reverse the trend. As oil and gas supplies from the North Sea are projected to decline considerably over the next few years and European coal is becoming too costly to exploit, increasing amounts of these resources will have to be imported from more distant regions, especially from the Asian parts of the Russian Federation, the Middle East, the Caspian Sea region and Africa.

3.       The economic and political implications of such a growing European dependence on fossil fuel imports are considerable over the medium term and of even greater concern when seen in the perspective of the next several decades when global reserves of fossil fuels are expected to diminish dramatically. Four-fifths of Europe’s own fossil fuel reserves are coal and other solid fuels which will remain an important back-up source for electricity generation, even as coal mining and the use of coal in power stations will decline. There are currently few real substitutes for oil in transport, the largest oil-consuming sector, even though the use of bio-fuels is strongly promoted at European Union level and the development of hydrogen-driven fuel cells looks promising. If the price of oil rises further, these new energy forms will become increasingly competitive.

4.       Electricity, as a secondary source of energy, is increasingly valued because of its high quality. However, since the burning of oil and coal for its generation causes considerable pollution, more and more European countries are switching to gas-fired power generation which causes fewer emissions of carbon dioxide and other greenhouse gases. Nuclear energy – considered relatively clean from the emissions viewpoint but more problematic as regards the management of waste, operational safety and protection against terrorist attacks – has polarised opinions across Europe. Stricter operational standards, reinforced safety, new technologies and better communication with the public may well render nuclear energy more acceptable – especially in view of the need to preserve the competitiveness of European industries and to meet environmental commitments – until such time as vast amounts of clean and safe energy at competitive prices may become available via thermonuclear fusion.

5.       The Assembly views the European Union’s Emission Trading Scheme, scheduled to start in 2005, as an important tool for achieving a lasting reduction of greenhouse gas emissions, especially in western Europe where, despite certain efforts, levels are well above the European average.

6.       The Assembly regrets that renewable energy sources – including solar, wind, hydro and geothermal energy as well as biomass, bio-fuels, hydrogen and combustible waste – are on the whole underutilised in Europe despite their considerable potential. The European Union’s resolve to increase the share of renewables in its total energy consumption to 12% by 2010, and to achieve a 5.75% bio-fuel substitution for fossil fuels in transport by 2010, is commendable and should serve as a benchmark also for countries outside this area. However, renewable energy sources will not provide a complete answer to the reality of steadily increasing energy demand.

7.       As the opening of energy markets across Europe adds pressure on individual countries to review the relationship between the state and the various energy enterprises, it is high time to debate and make informed political choices – starting with the European Union and its internal energy market – regarding priority areas of action in support of research, resource development, strategic reserves, investment in power generation, network infrastructure and regulation at pan-European level. At the same time, a country-specific mix of energy resources reflecting the national situation is desirable for individual countries, as are efforts to reduce reliance on any one type of energy or a single supplier, especially in Central and Eastern Europe.

8.       The Assembly refers to its Resolution 1413 (2004) on avoiding electricity blackouts in Europe, in which it maintains that substantial energy savings can be reached throughout Europe without impairing living standards or industrial output. This is essential for stabilising energy demand in Europe through further improvements in energy end-use efficiency and greater incentives for energy savings in the transport, power and construction sectors.

9.       Given the limited indigenous energy resources in most European countries, Europe has a vital interest in intensifying the energy dialogue with its closest partners in order to minimise the physical, economic and political risks to the security of energy supplies for both importing and exporting countries. In the Council of Europe area, this implies strengthening long-term energy co-operation with, amongst others, the Russian Federation and the countries in the Caspian Sea region. The Assembly in this context reiterates its call, contained in Resolution 1324 (2003) on Europe and the development of energy resources in the Caspian Sea region, for the countries concerned to secure the best use of their energy resources by reaching early agreement on the legal status of the Caspian Sea, ratifying the Energy Charter Treaty and its Protocol on Energy Efficiency and Related Environmental Aspects and by concluding the negotiations for a Transit Protocol.

10.       The Assembly in conclusion calls on the member states of the Council of Europe:

i.       to jointly shape coherent pan-European framework policies permitting greater energy savings and a gradual shift toward alternative sources of energy, including biofuels and hydrogen-driven fuel cells for use in hybrid vehicles, in order to replace the rapidly diminishing reserves of fossil fuels;

ii.       to engage in the modernisation of coal-fired plants currently in operation and to develop further “clean coal” technologies and carbon sequestration techniques;

iii.       against the background of growing scarcity of fossil fuels and stricter environmental constraints under the Kyoto process, to take under renewed consideration, where applicable, their policies on nuclear energy;

iv.       to pursue joint research on thermonuclear fusion and to allocate the necessary financial resources for building the International Thermonuclear Experimental Reactor (ITER project);

v.       to ensure adequate safety measures for the long-term disposal of highly radioactive nuclear waste and to encourage a debate on the development of regional repositories;

vi.       to invest additional resources in the development of new technologies for the enhanced use of renewable energy sources, in particular bio-fuels;

vii.       to support and participate in the European Union’s Emission Trading Scheme;

viii.       to agree on priority areas for joint energy research, resources development, strategic reserves, investment in generation and network infrastructure and regulatory frameworks;

ix.       to have energy prices better reflect the real cost of this resource to society, induce energy-saving behaviour and ensure fairer competition between different sources of energy;

x.       to draw up national energy saving plans, disseminate energy-efficient technologies, remedy the imbalance between different modes of transport and implement more energy saving measures in buildings.

II.        Explanatory Memorandum by Mr Berceanu, Rapporteur

Table of contents

1.       INTRODUCTION

2.       ENERGY IN EUROPE: CURRENT TRENDS

3.       DEVELOPMENT PROSPECTS FOR THE ENERGY SECTOR

      3.a.       Fossil fuels: oil, coal and natural gas

      3.b.       Nuclear options

      3.c.       Renewables

4.       IMPLICATIONS FOR EUROPE’S ENERGY POLICIES: TOWARDS A REASONABLE BALANCE

5.       CONCLUDING REMARKS

*

*       *

1.       INTRODUCTION

1. In September 2003, the Rapporteur and several other members of the Assembly presented a motion for a resolution on Europe’s growing energy vulnerability (Doc. 9946), pointing to the continent’s considerable, and growing, sensitivity with regard to the security and cost of its energy provision. While commending European countries for their efforts to improve their energy situation, the motion also stresses the urgent need for Europe to review its medium- and long-term energy supply prospects and to identify appropriate policy options, taking into account amongst other things European Union enlargement.

2. Energy, as an essential component of Europe’s economic and social development, is no doubt central in achieving sustainable progress towards meeting the needs of both current and future generations of Europeans. The growing energy consumption and dependence on energy imports of most European countries is hence a cause for concern, especially against the background of stiffening global competition for primary energy resources, driven by economic development and population growth, and Europe’s ambitious environmental commitments. Covering nearly all of Europe, the Parliamentary Assembly of the Council of Europe is a highly proper forum to discuss energy policy challenges in the wider Europe.

3. In response to the above mentioned motion for a resolution, the present report seeks to analyse Europe’s current energy situation and to address various development prospects. The report starts with an outline of the present energy situation in Europe with regard to consumption, production, trade and environmental constraints. It continues with an overview of the development prospects for various energy sectors, followed by an outline of the policy implications of trying to improve Europe’s energy situation. In concluding, the report seeks to draw up practical guidelines and recommendations towards improving Europe’s overall energy balance. Although the problem of

power cuts and blackouts is an important issue, the present report does not specifically address it, since Mr Melčák has already done so in a separate report (see doc. 10350 on “Avoiding electricity blackouts in Europe”).

4. For the purposes of this report, Europe is taken to include all Council of Europe member states except Andorra, Liechtenstein and San Marino due to these countries’ limited size. Furthermore, in terms of presentation, Europe has been divided into Western Europe (WE)1, Central, Eastern and Southern Europe (CESE)2, plus the Russian Federation and some CIS countries3 (R&CIS). The report draws mainly on data and information from the Energy Information Administration (EIA) of the US Department of Energy4, the International Energy Agency (IEA), the European Commission (notably its Green Paper “Towards a European Strategy for the Security of Energy Supply”5, hereafter referred to as the Green Paper) and Eurostat.

2.       ENERGY IN EUROPE: CURRENT TRENDS

5. The present section reviews Europe’s present energy situation as regards consumption, production and trade patterns, as well as related environmental issues. Primary energy is defined as all energy consumed by end-users, excluding electricity, but including the energy consumed by utilities to generate electricity. We will refer mostly to the Btu (British thermal unit)6 measurement unit. Unless otherwise indicated, all data used in this chapter is from the EIA.

2.a.       Energy Consumption (Demand)

6. As the figure below illustrates, total primary energy consumption (including the amounts lost in the generation, transmission and distribution of energy) has grown in most of Europe over the past decade. Between 1992 and 2002, consumption has grown annually by an average of 1.1% in Western Europe and 2.3% in Central, Eastern and Southern Europe (CESE). In the R&CIS region, energy consumption has fallen steadily (primarily as a result of the collapse of production following the disintegration of the Soviet Union), but has recuperated somewhat in more recent years (at an average annual growth of 1.6% between 1999 and 2002). On a global level, Europe accounted for nearly 29% of world primary energy consumption in 2002 (WE 16.4%, CESE 3.7% and R&CIS 8.6%), with EU-15 alone absorbing 19% of world oil, 16% of natural gas, 10% of coal and 35% of uranium in 1999.

Total Primary Energy Consumption (Quadrillion Btu): 1992-2002-

7. The situation is similar also in per capita terms (see the figure below). Over the past decade, annual primary energy consumption per capita has grown on average by 1.6% in WE and 1.9% in CESE, while it has fallen in R&CIS (augmenting only slightly in the past couple of years). Although per capita consumption levels in Western Europe are much lower than in the US, they are on average still very high.

Average Per Capita Primary Energy Consumption (Million Btu): 1992-2001

8. With regard to energy intensity (measured as primary energy consumption per USD (1995 market exchange rates) of GDP), as shown in the figure below, western European levels have on average remained fairly stable and low. By contrast, although the average energy intensity level in R&CIS has fallen substantially since 1992, it still remains very high. CESE countries have on average reduced their energy intensity levels somewhat over the past decade.

Average Primary Energy Intensity (Thousand Btu): 1992-2001

9. The table below shows the average shares of different energy sources in total primary energy consumption in OECD Europe7, EU-15 and EU-258. Although the share of oil in total consumption has decreased since the oil crises of the 1970s, it still dominates the European energy balance. While the use of coal is generally declining, the use of natural gas continues to increase9. On the whole, renewable sources of energy (hydropower; geothermal, solar, wind, and biomass - wood and waste - energy) clearly make a deplorably small contribution to Europe’s total energy consumption (with only 7.8% in OECD Europe and 5.9% in EU-15 – and most of this is hydropower). Although the potential is significant, renewable energy sources are at the moment insufficiently exploited in most of Europe.

Total Primary Energy Consumption by Energy Type (% of total consumption): 2002

10. The exploitation of renewables varies, however, from country to country - mainly because of diverse geographical and climatic conditions, but also because of policy differences. According to Eurostat, the share of renewable energy sources in total domestic energy consumption within EU-15 in 2001 ranged from around one-fifth/one-quarter in Austria, Finland and Sweden to just around 1-2% in Belgium, Germany, Ireland, Luxembourg, the Netherlands and the UK. Variations are also noteworthy with regard to nuclear energy. Whereas nuclear energy consumption is nil in some countries, the share of nuclear energy in total consumption is quite substantial in others, such as in France where the nuclear sector represents as much 37% of total primary energy consumption and generates 77% of all electricity.

11. Furthermore, “if nothing is done”, as the Green Paper puts it, the total energy picture for EU-30 (i.e., EU-25 plus Bulgaria, Norway, Romania, Switzerland and Turkey) will in 2030 still be dominated by oil and other fossil fuels – with total energy consumption projected to be covered by oil (38%), gas (29%), solid fuels (coal; 19%), renewables (8%), and nuclear energy (6%).

12. In absolute terms, the biggest energy users are households and the tertiary sector. While their energy consumption has risen constantly, industrial energy demand has remained fairly stable in EU-15, with investment in modernisation leading to a lowering of energy intensity by 23% between 1985 and 1998. Even so, there is still a strong potential for further energy savings: as the European Commission notes in its December 2003 Communication on Energy Infrastructure and Security of Supply, total final energy consumption in the EU is about 20% higher than can be justified on purely economic grounds. CESE and R&CIS countries are likely to follow a similar trend in consumption patterns and to gradually undertake energy saving measures.

13. Seen from another perspective, the transport and building sectors account for, respectively, 32% and 40% of energy consumption. The energy consumption of the transport sector (which is almost entirely dependent on oil10) has risen sharply over the past few decades. This trend is expected to continue, as passenger transport within the EU is set to increase by around one-fifth by 2010, most strongly in the new member countries. In addition, the transport sector’s energy intensity increased by 10% between 1985 and 1998. With regard to the building sector, heating is clearly the largest energy consuming component. While combined heat and power generation as well as greater technological efficiency have contributed to reducing energy needs somewhat, heating still accounts for around one-third of total consumption.

14. Finally, the demand for electricity has grown much more rapidly than that for other types of energy. The growth in demand for electricity is expected to continue, especially in the new and future EU member countries. Overall energy demand is in fact expected to surge in most transition countries as their economies pick up growth and expand much faster than in western Europe. This will obviously increase the need for good network co-ordination, new capacity and possibly also constraints on demand to ensure stable power supply.

2.b.       Energy Production (Supply)

15. The figure below plots Europe’s primary energy production11 over the past decade. Energy production in R&CIS fell until 1997, when it started to grow again so as to now almost reach the levels of the early 1990s. In Western Europe, production increased until the mid-1990s and has since remained fairly stable. Energy production in the CESE countries has remained more or less at the same (low) level throughout the past decade. On a global level, Europe (as defined in this report) accounted for one-quarter of world primary energy production in 2002 (WE 10.4%, CESE 2.2% and R&CIS 12.4%).

Total Primary Energy Production (Quadrillion Btu): 1992-2002

16. In terms of different energy sources, the production of oil, gas and nuclear power accounts for around one-fifth and one-quarter each of total energy production in both OECD-Europe and EU-15. The production of coal as part of total energy production is slightly higher in OECD-Europe than in EU-15, while renewable energy sources (i.e., hydropower and other) yield only around 12% in both country groups. Nevertheless, the production of renewables as part of total primary energy production in Europe has increased, albeit slightly. For example, in EU-25, the share of renewables in total energy production rose from 8.1% in 1991 to 10.6% in 2002.

Total Primary Energy Production by Energy Type (in % of total production): 2002

Note: ‘Other’ includes net geothermal, solar, wind, and biomass (wood and waste) electric power.

17. The Russian Federation is clearly Europe’s “energy giant”. In 2002, it was (after Saudi Arabia) the second largest world producer of crude oil (with 10.7% of world production) as well as the largest producer of natural gas (accounting for 22.7% of world production), the sixth largest hard coal producer, and, in 2001, the fifth largest producer of both nuclear power and hydropower.12

18. Some other European countries are also strong in energy production internationally. For example, with regard to crude oil, Norway and the UK were the seventh and the tenth largest producers in 2002. In that year the UK, the Netherlands and Norway were the fourth, sixth and eighth producer, respectively, of natural gas, while Poland and Ukraine were the seventh and ninth largest hard coal producers. Furthermore, in 2001, France was the world’s second largest producer of

nuclear power (with 15.9% of the market)13, while Germany was the fourth, the UK the seventh, Ukraine the ninth, and Sweden the tenth. Finally, with regard to hydropower, Norway14, Sweden and France were, respectively, the sixth, eight and ninth largest producers in 2001.

19. With regard to electricity, total installed capacity in EU-15 amounted to nearly 600 GW in 2001, with most electricity being generated from nuclear energy (33%), solid fuels (25%), natural gas (18%), hydropower and other renewables (15%), and oil (6%). The electricity generation level in the ten new EU member states was roughly half the EU-15 total in 2000 while the three remaining candidate countries (Bulgaria, Romania and Turkey) accounted for about a third.

2.c.       Energy Trade

20. With a few exceptions, Europe is consuming far more energy than it produces. On the whole, in 2002, both WE and CESE had a total energy deficit (signifying that consumption outweighed production) of 25.1 and 6.6 quadrillion Btu respectively. Only Denmark, Norway and the UK in Western Europe enjoyed energy surpluses (i.e., production outweighing consumption)15 while the remaining WE countries and all CESE countries had energy deficits. Although R&CIS as a whole had an energy surplus of 15 quadrillion Btu in 2002, this was attributed to the energy surpluses of Azerbaijan and the Russian Federation16, while the other R&CIS countries also suffered from energy deficits.

21. Most European countries hence rely on external sources for their energy consumption. Not counting those few with energy surpluses, in 2002 the WE countries on average relied on external energy sources for 66% of their energy consumption. Similarly, an average 55% of the energy consumption in the CESE was covered by external sources in 2002, with the proportion of 72% in the R&CIS countries’.

22. Although the EU succeeded in reducing its external energy imports following the oil crises of the 1970s17, import dependence has grown again over the past decade. Between 1991 and 2002, net imports18 of primary energy as part of gross inland primary energy consumption increased from 49.6% to 51.8% in EU-15 and from 46.6% to 49.3% in EU-25. In 1999, this import dependence cost EU-15 around € 240 billion (or 6% of total imports and 1.2% of GDP)19.

23. The strongest dependency is on oil. In 2000, 76% of EU-15’s demand for oil was met by external sources. The figures for gas and coal were lower, but still high at around 40% and above 50%, respectively. While Europe is a relatively strong producer of nuclear power, EU-15 nevertheless depended on external supplies for 95 % of its uranium requirements in 2000.

24. If current energy use patterns are maintained, the Green Paper projects import dependence to increase further, to 54%, in EU-15 and 42% in EU-30 by 2010 and to 71% in EU-15 and 60% in EU-30 by 2030. In the case of oil, imports could cover as much as 90% of EU’s needs already in 2020, while gas and coal dependency levels of 70% and 100%, respectively, appear altogether plausible. The enlargement process is likely to reinforce the trend of increasing energy import dependence, as the new member countries on average import 95% of their oil and 84% of their natural gas. Furthermore, following the restructuring of the coal sector in the new member countries, those that currently are net coal exporters might have to import 12% of their coal needs by 2020 (as imports may be cheaper than domestic production).

25. Following from their strong positions as oil producers, the Russian Federation, Norway and the UK are also big exporters (the second, third and ninth largest, respectively, in 2002). Russia was also the largest exporter of natural gas in 2002, while Norway and the Netherlands were fourth and fifth. With regard to hard coal, Russia and Poland were the fifth and ninth largest exporters20.

26. Germany, Italy, France, the Netherlands, and Spain are all among the world’s ten largest importers of crude oil, while the same countries and Turkey are also among the ten largest natural gas importers. Germany, the UK, Spain, the Netherlands, and Russia are also among the ten largest importers of hard coal. The Russian Federation is EU-15’s single largest supplier of natural gas (with 40% of total EU gas imports in 2001), while the Middle East provided 45% of total EU oil imports in 2001).21

2.d.       Environmental Commitments

27. Carbon dioxide (CO2) emissions are considered to be a major cause behind what is commonly believed to be a current process of global warming. They result from the use of fossil fuels, especially for the generation of electricity. The burning of oil is believed to account for 42% of world CO2 emissions, coal for 38% and gas for 20%, while their use in the world electric power industry accounts for 39% of total energy-related emissions22. The Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC), signed in December 199723, aims to induce countries to reduce emissions of CO2 and other greenhouse gases (that is, methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6)). Parties to this agreement are to decide how to meet their respective emission reduction goals during a five-year period (2008-2012).

28. Ahead of the entry into force of the Kyoto Protocol24, the EU has made its target commitments legally binding. EU member countries are expected to reduce, by 2008-2012, their emissions of greenhouse gases to, on average, 8% below their 1990 levels. To reach this goal, the Emissions Trading Directive obliges the member countries to set out national emissions targets and to produce National Allocation Plans (NAPs) specifying the total amounts of CO2 emissions allocated to each industry sector and larger facility (granting them a formal right to emit a certain amount of CO2). Emission allowances can then be traded on an EU market25, starting in 2005. The Directive was to have been transposed into the national law of member states by the end of 2003, but to date only four countries (Austria, Germany, France and Sweden) have fully complied. Furthermore, only eight NAPs have been approved26, while another ten are currently being evaluated27. Seven countries are hence still behind schedule28.

29. Several are protesting the economic costs of these actions, which, it is argued, could negatively affect the competitiveness of Europe’s industry, especially in energy-intensive sectors. Thus, some representatives of the EU power industry claim that the reduction initiatives could cost around € 2 billion per year. However, other studies imply that the economic cost of the CO2 emission constraints will be fairly low over the next few years, primarily due to the possibility of trading emission allowances between high and low reduction-cost countries and industries29.

30. Despite some environmental measures, CO2 emissions have continued to rise from their 1990 levels in most of Western European countries. It is only Germany (upon reunification), the UK, and to a lesser extent Denmark and Luxembourg that have since managed to reduce their emission levels. Overall emission levels in the rest of Europe have remained stable throughout the past decade, even though in the early 1990s the R&CIS region showed some initial reduction due to contractions in production. In per capita terms, emissions from Western European countries lie on average above those from both CESE and R&CIS countries. Furthermore, the Green Paper expects CO2 emissions to increase further by 5% in EU-15 and 7% in EU-30 by 2010 and by, respectively, 22% and 31% by 2030.

Total CO2 Emissions (in million metric tonnes): 1990-2002

3.       DEVELOPMENT PROSPECTS FOR THE ENERGY SECTOR

31. Our planet’s six billion inhabitants currently derive over 80% of the energy they use from fossil fuels - oil, coal and gas. This domination of fossil fuels is expected to continue, so as to reach nearly 90% by 2020. All projections for future decades point to inexorably growing global energy needs due to population and economic growth, especially in the rapidly developing countries of Asia. The latter’s’ share of world demand is set to grow from 30% now to 43% in 2030, while the OECD’s share is expected to lower from 53% to 47%. These projections raise serious concerns about the security of energy supplies, the economic and environmental implications of energy production and use. They also highlight the need for coherent energy policies and more research into innovative solutions.

3.a.       Fossil Fuels: oil, coal and natural gas

32. Proven global oil reserves, according to a British Petroleum study30, presently stand at 1.15 trillion barrels, or about 10% more than in 1980. With current extraction levels, this means plentiful oil supplies for at least the four coming decades. However, while world oil reserves can be considered fairly abundant, western European reserves – notably those of Norway and the UK - are more limited, at only around nine and five years, respectively, of annual production at present levels. The Green Paper estimates - assuming no change in consumption patterns or related technologies - that the EU has proven reserves for only eight years. The oil reserves of the Russian Federation and Azerbaijan are estimated to be somewhat higher, lasting for at least another two decades.

33. Global competition for oil is clearly becoming fiercer as the energy needs of fast-developing larger countries like China and India are soaring. In 2003 alone, the Chinese economy expanded by over 9% with booming energy-intensive industries, such as steel and aluminium production, and rapidly growing car usage - leading to roughly a third of the rise in global oil consumption and propelling the country into the world’s second largest oil consumer behind the US. Being a net importer of oil since 1994, China nowadays draws on imports for half of its oil needs. This clearly contributes to putting an upward pressure on oil prices, reinforcing the current trend.

34. While oil prices remained relatively low and stable for most of the 1990s, they have increased and oscillated greatly in the last five years or so. On the whole, however, although oil use might be expected to diminish slightly due to price volatility and environmental concerns over CO2 emissions, it will continue to remain an essential component in Europe’s energy balance. There are currently few real substitutes for oil in the largest oil-consuming sector, that of transport, even though the use of biofuels is strongly promoted at EU level and the development of hydrogen cells promising. These new energy forms will face better chances to compete with oil products in terms of cost if the price of oil goes up further.

35. As a voracious consumer of energy and the world’s second largest exporter of coal, China has also had a big effect on coal prices, which rose by more than 80% in 2004, a level unseen since the early 1980s. Even though it is the world’s largest coal producer, the country’s growing energy needs will certainly require more coal for internal use and permit less for export. To sustain their economic success, some big Asian economies like China, India and Korea are also embracing other forms of energy, especially nuclear power and natural gas, but will no doubt remain big consumers of oil and coal for a long while yet.

36. Four-fifths of Europe’s fossil fuel reserves are coal and other solid fuels such as lignite, peat and oil shale. Within the EU, coal is today commonly used as a back-up fuel and almost exclusively for the generation of electricity. Coal-based power generation – accounting for 32% in EU-25 – is particularly important to Poland (96%), the Czech Republic (75%), Greece (71%), Germany (51%), Bulgaria (40%), Spain (38%) and the UK (32%). However, most European coal is highly uncompetitive compared with imported coal. It is costly to mine due to difficult geological conditions and also in part due to social provisions that are more extensive than in other world regions. Furthermore, coal is bulky and requires large storage areas, putting it at a physical disadvantage vis-ŕ-vis oil and gas. It also causes pollution at every production stage and during utilisation.

37. The lack of competitiveness of coal is causing many European countries to abandon its extraction. Although the EU’s production of coal has doubled with enlargement, future output is expected to decline as further restructuring of the coal mining industries, especially in Poland and the Czech Republic, continues. Western European coal use will suffer, partly also due to obsolete infrastructure. The IEA estimates that around 40% of western Europe’s coal plants will need to be replaced by 2015. Modern technologies, however, promise a somewhat brighter future for coal, with efficiency enhancement and cleaner performance through state-of-the-art technical solutions such as CO2 emissions capture and sequestration.

38. As natural gas burns more cleanly than oil and coal, environmental considerations have of late boosted its use. It is also a relatively cheap (compared to oil) source of energy, although an upward trend in prices is to be expected as demand increases. The Green Paper projects the consumption of gas to rise steadily, in absolute and relative terms, especially in the new EU member countries where it in fact is expected to double, in part because of stricter environmental standards.

39. The largest consumers of natural gas in the EU today are the industrial and residential sectors. In the near future, however, the sector for expansion is expected to be the generation of electricity, where it currently accounts for only 15% of production. By 2020-30, almost half of electricity could be produced by natural gas. Much of the forecast increase in EU’s installed electricity capacity (from the current 600 GW to 800-900 GW in 2020) is hence expected to be gas-generated. While the EU’s gas reserves are more bountiful than its oil reserves, the Green Paper predicts that the North Sea gas deposits will be exhausted within 25 years if production continues at its present rate. Enlargement will further increase EU’s gas imports.

40. As Europe’s imports of all fossil fuels are set to increase further, it is important to consider the geopolitical dimension of this dependence. Most of Europe is clearly dependent on oil supplies from Norway, Russia and OPEC countries. Future imports of fossil fuels will tend to come from increasingly distant places with obvious price consequences. Thus, by 2020, the Green Paper expects OPEC to cover as much as half of the EU’s energy needs compared to about 40% at present. A similar dependence has developed with regard to gas, as over 90% of EU’s total gas imports comes from just three sources - Russia, Norway and Algeria. Energy dependence is even stronger in the CESE, where some countries are completely dependent on a single gas pipeline linking them to a single supplier country. Such a situation naturally makes many European countries vulnerable to supply shocks, price oscillation, transport costs and other risks.

3.b.       Nuclear options

41. Nuclear energy, produced in thirteen EU countries (Belgium, the Czech Republic, Finland, France, Germany, Hungary, Lithuania, the Netherlands, Slovakia, Slovenia, Spain, Sweden, and the UK), accounts for a third of the electricity generation in the EU. Important nuclear energy generation facilities are also installed in Russia, Ukraine, Bulgaria, Romania and Armenia. Europe harbours only 2% of the world’s vast natural uranium reserves and several mines are currently closing. Although both uranium and plutonium can be recycled once separated from waste, Europe’s nuclear power industry almost exclusively relies on external sources for its raw material requirements.

42. Nuclear power is one of the few energy sources that emits virtually no greenhouse gases. There are, however, clearly problems with managing and stocking nuclear waste (especially highly radioactive waste, which accounts for around 5% of total nuclear waste). Despite feasible definitive storage spaces and new operation techniques, practical problems of long-term storage remain. In this regard, public opinion plays an important role, and not only in terms of nuclear waste management. The potentially serious health and environmental hazards of nuclear power generation are reasons for part of public opinion to oppose it, especially after the Chernobyl accident in 1986. While Italy has already shut down its reactors, five other nuclear power producing countries (Belgium, Germany, the Netherlands, Spain, and Sweden) have committed themselves to eventually phasing out nuclear power. Of the remaining countries, only Finland is considering to build a new nuclear reactor while the construction of nuclear reactors is underway in Russia (2), Ukraine (4), Slovakia (2) and Romania (1).

43. The recent enlargement added 18 nuclear reactors to the EU. While some of the new (and potential future) EU member countries rely heavily on nuclear power, several (including Bulgaria, the Czech Republic and Lithuania) have been encouraged to shut down reactors considered as insufficiently safe by EU standards. On the whole the Green Paper forecasts nuclear power production and consumption in an EU-30 to first peak around 2010 and then halve by 2030 - from around 250 million toe (tonnes of oil equivalent) in 2000 to around 125 million toe in 2030.

44. For nuclear power to play full part in Europe’s energy balance and to make significant contribution to the security of energy supply, the management of radioactive waste has to improve. Whether such waste comes from nuclear power stations or medical and industrial uses, it needs to be handled in an even safer, more economic, more environmentally acceptable and more publicly accountable manner than up to now. Apart from the low- and intermediate-level waste – which constitutes more than 90% of the total and which can be recycled into low radioactivity end-product for storage through a well-mastered process – materials that are highly radioactive and often have long-lasting activity (such as spent nuclear fuel) require heavy protection and/or complex reprocessing before final storage. Some radioactive isotopes (e.g. Americium-243, Plutonium-239 and Technetium-99) require isolation for many thousand years.

45. The quantities of radioactive waste generated by the nuclear power sector should in all fairness be seen in comparison with those of overall industrial waste. Thus, in the EU-15, high activity radioactive waste in 2000 was about 500mł compared to 50 000mł for all types of radioactive waste, about 10 million mł of toxic industrial waste and one billion mł of industrial waste. Nevertheless, despite the relatively small volume, high-level waste represents 99% of the total radioactivity resulting from nuclear fission. While low- and intermediate-level waste are disposed of routinely for periods of between 100 and 300 years in sealed containers on protected sites, solutions for long-lived waste are more difficult to find. Many OECD countries are working on projects for the geological burial of such waste. Even though radioactive waste management is widely regarded as a national responsibility, the option of international repositories should also be envisaged.

46. Apart from the conventional nuclear power generation employing nuclear fission reactions to produce heat and electricity, research is aiming to develop thermonuclear fusion comparable to the energy-producing process in the sun and stars. Considered as an inexhaustible (converting hydrogen isotopes, plentiful in nature, into helium), clean (end-of-reaction helium is chemically neutral) and safe (any malfunctioning stops the reaction chain) energy source, fusion is subject to an important global research network. The European Union, the US, China, Japan, South Korea, and Russia have all agreed to combine their scientific and financial resources in building ITER (International Thermonuclear Experimental Reactor) but the project has stalled since December 2003 over disagreements on the site (the EU, China, and Russia favour the French city of Cadarache, while the US, South Korea, and Japan back the Japanese town of Rokkashomura). However, even if research is advancing towards the testing and practical application phase, commercially exploitable power from fusion is not expected to flow before another four to five decades.

47. Conventional nuclear energy currently generates about 17% of the world’s electricity and is likely to remain an inevitable energy option in many countries for several more decades, at least until such time as abundant, clean and safe electricity at competitive prices can start flowing from thermonuclear fusion or other technological innovations. In the meantime, the world community must ensure that nuclear power stations currently in operation and those to be built in future function at the highest possible safety level, and that sufficient resources are invested in nuclear waste treatment. The set-up of national laws and international agreements governing nuclear energy is already on the whole comprehensive and complete. This demonstrates strong governmental involvement in the sector, and one that should be made to prevail also in deregulated markets.

3.c.       Renewables

48. As pointed out in previous sections, renewable energy sources (solar, wind, hydro and geothermal energy, as well as biomass, biofuels, hydrogen and combustible waste) are, on the whole, under-utilised in Europe despite their potential in most countries. A 1996 EU Green Paper31 and a 1997 White Paper32 on renewable energy sources have set a political, though not legally binding, goal of increasing the share of energy from renewable resources in total EU’s energy

consumption to 12% by 2010. Reaching this goal would require an estimated total investment of € 260 billion a year up to 2010. Although such efforts would absorb about 30% of total investments in the energy sector, they could also create between 500 000 and 900 000 new jobs, save around € 21 billion in fuel costs between 1997 and 2010, and reduce imported fuel costs by approximately 17% and CO2 emissions by around 402 million tonnes/year by 2010.

49. A serious obstacle to the greater use of (not all, but many) renewables is the higher initial investment costs when compared to conventional fossil fuel cycles. This is primarily due to the fact that current fuel prices do not properly reflect the objective full cost, i.e. the external cost of the environmental damage caused by the use of such fuels. To some extent, the renewable energy industry also suffers from a lack of confidence on part of investors. The Green and the White Papers on renewable energy sources pin their hopes on recent technological developments and progress, which, slowly but surely, are making renewables more commercially competitive. Their costs are dropping rapidly (while those of conventional fossil fuels are rising), particularly with regard to wind power, while other technologies, such as for biomass, solar energy and small-scale hydropower, are increasingly competitive in smaller decentralised applications.

50. It is hoped that the part of renewables in electricity production could rise from 14% in 1996 to 22% in 2010. However, there are also problem with wind, solar and other intermittent sources of energy. They are tricky to connect to the grid. Their output varies due to weather conditions and is difficult to store. Electricity from renewables cannot therefore be readily dispatched, which puts them at a disadvantage in liberalised markets. However, seen from a wider perspective, there are other good reasons for increasing the use of renewables in Europe’s energy balance. These include the potential benefits in protecting the environment and reducing CO2 emissions and, as indigenous sources of energy, they could contribute towards reducing the dependency on energy imports.

4.       IMPLICATIONS FOR EUROPE’S ENERGY POLICIES: TOWARDS A REASONABLE BALANCE

51. While Europe’s energy consumption is relentlessly growing, there are clearly limited options of increasing internal energy supply in an environmentally sustainable way, and greater reliance on energy imports renders European economies more vulnerable to external shocks. Moreover, the opening of energy markets across Europe is adding pressure on individual countries to review and restructure the relationship between the state and energy enterprises. It is therefore high time to debate and make informed political choices regarding energy sources, investment and regulation at pan-European level.

52. Many European power plants are coming to the end of their lives and far-reaching strategic decisions will have to be taken on new investment to replace existing capacities. Despite gradual disengagement, national and European authorities will continue to play a primordial role in the energy sector through regulation and policy signals watched carefully by investors. Their stand on the energy mix will accordingly promote or reduce industry’s engagement in individual sectors.

53. From an institutional perspective, the EU’s Green Paper addresses the need to manage Europe’s energy supply. It consequently calls for the development of less polluting internal energy sources (including nuclear energy and renewables), the preservation of access to internal resources, maintaining competition, and ensuring access to external supplies (including actively supporting the energy needs of the EU in producer countries and strengthening supply networks). The subsequently imposed carbon emission reduction targets inevitably imply higher energy system costs for the countries concerned. Thus, energy costs for EU industries could increase between 9% and 30% by 2010. Europe is definitely moving towards an era of more expensive energy.

54. Energy markets in Europe are commonly very concentrated and competition limited. The concentration of the electricity market is particularly high in Greece, Ireland, France, Belgium, Portugal, the Czech Republic, the Slovak Republic, and Italy, where the largest provider caters for between 40% and 85% of the total supply. Similarly, with regard to gas, in most cases one company controlled well over 50% of the gas produced or imported33.

55. In the past few years, however, much progress has been made towards the completion of an internal and liberalised energy market within the EU. The process started in 1999, when some large firms were allowed to choose their electricity and gas suppliers. The entering into force of the new gas and electricity Directives on 1 July of this year extended competition further (with the final step to full market opening expected by 2007). The Directives include measures against anti-competitive behaviour (such as state aid) and seek to ensure a coherent regulatory framework to encourage investments in the generation and transmission infrastructure (for electricity) as well as interconnections and network infrastructure (also for gas).

56. The liberalisation process might, however, be constrained by public demands for state intervention to ensure security of electricity supply, especially following last year’s blackouts. Some fear that the deregulation process might undermine incentives for industry to invest in the maintenance of networks and spare capacity. Another worry is that liberalisation will take place at the expense of environmental matters.

57. One crucial question to be answered is about the future of the nuclear energy industry. It forms the object of a heated public debate in some countries, while in others, such as Sweden, it is being reduced in scope via the closure of plants. However, nuclear power is attracting new supporters. One reason is the dilemma aptly expressed by the then Director General for energy of the European Commission, Loyola de Palacio, when she said: “The EU can shut down lots of nuclear plants quickly, or it can meet the Kyoto targets – but not both”.

58. However, sustaining or expanding nuclear facilities will be costly. Up to 75% of the lifetime costs (which does not include decommissioning) of a nuclear electricity plant are incurred upfront, compared to around 25% for a gas-fired plant. While a new nuclear plant costs around USD 1 500 – 2 000 per kW of installed capacity, a coal plant costs around USD 1 000 per kW and a gas plant even less (given current coal and gas prices)34. Although most argue that nuclear energy is not possible in a liberalised market because of high financing costs, there are innovative “market-friendly” ways of supporting nuclear power generation35. It is also necessary to support further research and high safety standards on the storage and management of nuclear waste.

59. Although the use of renewables is increasing step by step, they still play only a marginal role in Europe’s energy balance. An eager promoter of renewables, the EU itself is still a far way from reaching the 12% target as a share in total energy consumption. If the situation is to improve, stronger policies and instruments are needed to support the use of new technologies, in particular those meant to lower emissions in the transport sector (such as hydrogen-powered fuel cells or bioethanol). Suggested actions to support renewables include ensuring fair access for renewables to the electricity market, fiscal and financial measures (notably subsidies and tax incentives) and national strategies to be defined by each EU member country. Moreover, profitable energies (such as oil, gas and nuclear power) could help finance the development of renewable energy technologies. Nevertheless, even a significant increase in the use of renewable energy sources will not be enough to cover the ever-increasing demand for energy.

60. Given the limited energy resources of most European countries, Europe cannot strive for energy self-sufficiency. Rather than purely seeking to minimise dependence (or maximise autonomy), Europe needs to minimise the risks of such a dependence. Europe’s response to its growing energy dependency should therefore partly lie in reducing the potential instabilities and risks, both physical (if for example production is halted or a resource exhausted) and economical (including price or exchange rate fluctuations as well as deliberate price moves on the part of exporting countries).

61. To this end, Europe needs to diversify further not only its energy resources, but also its energy supplies and suppliers in the geopolitical sense. In practice, this could mean expanding the energy mix in individual countries, developing a closer energy partnership with the Caspian Sea region (as is called for in this Assembly’s Resolution 1324 (2003) on “Europe and the development of energy resources in the Caspian Sea region”) and strengthening its long-term energy co-operation with Russia. To support an eastbound partnership (primarily in natural gas but also in oil), major investments in network and interconnection infrastructure, as well as in new transit facilities, are needed for transport from, for example, the Caspian Sea to other parts of Europe.

62. An important initiative in terms of European/international energy co-operation and sharing is the Energy Charter Treaty and its Protocol on Energy Efficiency and Related Environmental Aspects. Adopted in 1991, signed in 1994 and in force since 1998, they aim to foster co-operation and strengthen the rule of law with regard to energy-related issues beyond the bilateral agreements and in line with the current WTO (World Trade Organisation) rules. To date, 51 countries36 (plus the European Communities) have either signed or acceded to the Charter Treaty and Protocol37. Its provisions target the following five broad areas:

The signatory countries have committed to establishing policies promoting energy efficiency as well as legal and regulatory frameworks towards the efficient functioning of market mechanisms (including market-oriented price formation). It is hoped that a supplementary agreement on the interstate transit of energy resources can soon be concluded, provided that the European Union and the Russian Federation can overcome remaining differences.

63. Since Europe has a limited influence over energy supply conditions and its energy choices are restricted by available resources, one of its most important actions lies in managing energy demand. Securing the energy needs of Europe can simply not be achieved without rationalising and stabilising energy consumption. There is a clear need to intervene on the demand side, particularly by improving energy end-use efficiency and promoting energy savings in the transport and building sectors (the largest oil consumers and hence polluters). To this end, a number of actions can be instrumental. They include the completion of the internal market, harmonisation of energy taxes, promotion of energy saving schemes, dissemination of energy-efficient technologies, countering the imbalance between different modes of transport and implementing energy saving measures with regard to buildings.

64.       Demand management would also assist Europe in meeting its environmental commitments. At present, Europe is unfortunately not in a position to respond to the challenge of climate change in general or – and this holds also for EU members - meet the Kyoto Protocol commitments. In order to comply with the Kyoto Protocol, more stringent measures and policies are clearly called for in most European countries. In this regard, a recent Commission Communication on energy infrastructure and security supply38 calls for initiatives to reduce emissions from the power sector, constrain growth in demand through energy efficiency and introduce common rules for the taxation of energy products.

65.       In conclusion, your Rapporteur would like to stress the need to approach energy needs and solutions on a country-by-country basis in order to identify the right “energy mix” and policy combination for each individual country. Nevertheless, within the EU, there is a parallel need for a common energy strategy (if not a coherent energy policy). At the very least, a harmonisation of energy taxes is called for.

5.       CONCLUDING REMARKS

66.       It is in the obvious economic, political and social interest of Europe to establish a sustainable energy future for its citizens. Joint efforts by individual countries and on an institutional European level are needed to manage supply and demand, as well as for better energy co-operation and sharing, including within the framework of the European Energy Charter and its Protocols. At the forefront of supranational energy policy making, the European Union has been advocating various measures to ensure the security of energy supplies while calling for efforts to reduce greenhouse gas emissions. This requires a substantial shift towards the use of alternative or currently underexploited energy sources, greater energy savings at all levels and the revision of the existing Trans-European Energy Network guidelines in the light of recent and future EU enlargements.

67.       Modern technologies and coherent regulation can contribute significantly to establishing a better balanced, more diversified and more stable European energy system. Adequate investment is necessary in energy supply infrastructure and technological research, particularly with regard to renewables. The perspective of high and rising oil prices – currently around $46 a barrel – and other fossil fuels is an added argument for a wide ranging reshuffling of European energy industries towards greater diversification, strengthening and renovation of existing capacities, while assuring sustainable provisions for future needs. Whatever policy orientations are undertaken, they must be sufficiently long-term, stable and trustworthy to reassure industrial entities and investors in terms of risk management and profitability. Finally, there needs to be a permanent dialogue with the public in order to shape a broadly shared vision of common energy policies and orientations at European level.

Reporting committee: Committee on Economic Affairs and Development.

Reference to committee: Doc. 9946 and Ref. No. 2881 of 25.11.2003.

Draft Resolution adopted by the Committee on 21 January 2005

Members of the Committee: Mr Evgeni Kirilov (Chairman), Mrs Sigita Burbiene, Mrs Antigoni Pericleous Papadopoulos, Mr Márton Braun (Vice-Chairpersons), MM. Ruhi Açikgöz, Ulrich Adam, Hans Ager, Miguel Anacoreta Correia, Stojan Andov, Francisco Assis Miranda, Abdülkadir Ateş, Radu-Mircea Berceanu, Akhmed Bilalov (Alternate: Victor Eltsov), Jaime Blanco Garcia, Christian Brunhart, Milos Budin, Mevlüt Çavuşoğlu, Valeriu Cosarciuc, Ignacio Cosidó Gutiérrez, Giovanni Crema (Alternate: Andrea Rigoni), Řystein Djupedal, Iván Farkas, Mrs Siv Fridleifsdottir, Mr Carles Gasóliba i Böhm (Alternate: Joan Puig Cordón), Ms Jane Griffiths, MM Francis Grignon, Alfred Gusenbauer, Norbert Haupert, Anders G. Högmark, Klaus Werner Jonas, Jelko Kacin, Ms Verica Kalanović, MM. Karen Karapetyan, Orest Klympush, Anatoliy Korobeynikov, Rudolf Kraus, Petr Lachnit, Jean-Marie Le Guen, Harald Leibrecht, Gadzhy Makhachev (Alternate: Mrs Liudmila Pirozhnikova), Jean-Pierre Masseret, Miloš Melčák, Lars Kramer Mikkelsen, Ms Ljiljana Milićević, MM. Neven Mimica, Nikolaos Nikolopoulos, Conny Öhman, Jim O’Keeffe, Mart Opmann, Mrs Clara Pintat Rossell, MM. Bogdan Podgórski, Virgil Popa, Jeffrey Pullicino Orlando, Didier Ramoudt (Alternate: Geert Lambert), Luigi Ramponi, Maurizio Rattini, Maximilian Reimann (Alternate: Johannes Randegger), Dario Rivolta, Lord Russell-Johnston, MM. Volodymyr Rybak, Kimmo Sasi, Bernard Schreiner, Adrian Severin, Samad Seyidov, Leonid Slutsky, Ms Geraldine Smith, Mrs Aynur Sofiyeva, MM. Dimitar Stefanov, Qazim Tepshi, Frans Timmermans, Dragan Todorović, Ms Ágnes Vadai, MM. Geert Versnick, Arno Visser (Alternate: Mrs Jelleke Veenendaal), MM. Konstantinos Vrettos, Robert Walter (Alternate: Baroness Hooper), MM. Andrzej Wielowieyski, Marek Wikiński, Mrs Rosmarie Zapfl-Helbling, Mr Kostyantyne Zhevago.

N.B. The names of the members who took part in the meeting appear in bold.

Head of Secretariat: Mr Torbiörn

Secretary to the committee: Ms Ramanauskaite


1 EU-15 plus Iceland, Norway and Switzerland.

2 Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, the “the former Yugoslav Republic of Macedonia”, Malta, Poland, Romania, Serbia and Montenegro, Slovak Republic, Slovenia, and Turkey.

3 Armenia, Azerbaijan, Georgia, Moldova, and Ukraine.

4 www.eia.doe.gov.

5 COM (2000) 769 final, 29 November 2000.

6 The quantity of heat required to raise the temperature of 1 pound of liquid water by 1 degree Fahrenheit at the temperature at which water has its greatest density (approximately 39 degrees Fahrenheit). 1 M (106) Btu is 2.931x10-4 G (109) Wh, while 1 G Wh is 3412 M Btu. 1 M Btu is 2.52x10-8 M toe (tonnes of oil equivalent), while 1 M toe is 3.968x107 M Btu.

7 The European member countries of the Organisation for Economic Co-operation and Development (OECD) - EU-15 plus Czech Republic, Hungary, Iceland, Norway, Poland, Slovak Republic and Switzerland.

8 Similarly, in 1998, the average shares for EU-30 countries (i.e., EU-25 plus Bulgaria, Norway, Romania, Switzerland and Turkey) were: 40% oil; 21% gas; 19% solid fuels (namely coal); 14% nuclear; and 6% renewables (Green Paper).

9 Between 1991 and 2002 natural gas consumption as a share of total energy consumption in EU-25 increased from 19% to 23% (Eurostat).

10 Oil accounts for 98% of the transport sector’s energy consumption, which in turn represents 67% of total oil demand (Green Paper).

11 Extraction of energy products from natural sources to a usable form is called primary production. It takes place when the natural sources are exploited (for example in coal mines, oil fields, and hydropower plants) but does not include the transformation of energy from one form to another such as electricity or heat generation in thermal power plants or coke production in ovens.

12 Key World Energy Statistics: 2003, International Energy Agency.

13 In France, nuclear generation accounted for as much as 77% of total domestic electricity generation in 2001.

14 Hydro electricity in total domestic electricity generation was as high as 99% in Norway in 2001.

15 Surpluses amounted to 29.2%, 81.1%, and 11.8% of production, respectively.

16 Surpluses represented 39.7% and 31.1% of production, respectively.

17 Primarily as a result of energy conservation policies, development of internal resources (oil from the North Sea) and diversification (most notably nuclear power and research into renewables).

18 Imports minus exports. (Eurostat).

19 Green Paper.

20 Key World Energy Statistics: 2003, International Energy Agency.

21 Green Paper.

22 Key World Energy Statistics: 2003, International Energy Agency.

23 To date, 141 parties have signed, ratified or accepted the Protocol. Most Council of Europe members have either ratified or approved the Protocol (excepting Albania, Bosnia and Herzegovina, Serbia and Montenegro, and Turkey).

24 It has to be ratified by at least 55 countries accounting for 55% of total emissions from the industrialised countries. The Protocol entered into force on 16 February 2005,- 90 days after Russia’s ratification.

25 Allowing the “best-performing” entities to sell their remaining emissions credits to those with difficulties in meeting their target levels.

26 The NAPs of Denmark, Ireland, the Netherlands, Slovenia and Sweden have been approved without further examination, while those of Austria, Germany and the UK have been approved subject to some technical changes.

27 Namely those of Belgium, Estonia, France, Finland, Latvia, Lithuania, Luxembourg, Portugal, the Slovak Republic and Spain.

28 Namely Cyprus, the Czech Republic, Greece, Hungary, Italy, Malta, and Poland.

29 “Slightly Greener”, The Economist, 1 April 2004.

30 BP Statistical Review of World Energy.

31 “Green Paper - Energy for the Future: Renewable Sources of Energy”, COM (1996) 576, 20 November 1996.

32 “White Paper - Energy for the Future: Renewable Sources of Energy”, COM (97) 599 final, 26 November 1997.

33 Energy Infrastructure and Security Supply, COM (2003) 743 final, 19 December 2003.

34 “Bailing Out Big Business”, The Economist, 6 May 2004.

35 For example, the new nuclear power plant in Finland is supported by a coalition of around 60 companies (including many energy-intensive pulp and paper industries). The coalition has agreed to cover some of the initial costs (with the rest to be financed by commercial debt) and to purchase a certain amount of power once the plant is completed.

36 Albania, Armenia, Austria, Australia*, Azerbaijan, Belarus*, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland*, Ireland, Italy, Japan, Kazakhstan, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, “the former Yugoslav Republic of Macedonia”, Malta, Moldova, Mongolia, the Netherlands, Norway*, Poland, Portugal, Romania, Russian Federation*, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Turkey, Turkmenistan, Ukraine, United Kingdom, and Uzbekistan (* = ratification still pending). Serbia and Montenegro has signed the 1991 Charter, but not the 1994 Treaty.

37 As such it is indeed the largest multilateral regulatory framework under international law with regard to energy co-operation.

38 COM (2003) 743 final, 19 December 2003.